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What changes when one of the oldest industries—real estate—gets swept up in the PC revolution?

Nothing.

Whereas financial markets were quick to digitize, and most Fortune 500 businesses had broad adoption of computers, the commercial real estate industry—one of the largest in the world by value—was unchanged.

The missing element was the lack of digitization of data that existed solely on millions of sheets of papers and in the minds of thousands of real estate professionals.

The fix was simple, but extremely arduous: collect all of that data. In 1986, in a Princeton dorm room, Andy Florance set about the herculean task of gathering granular data on every single building in the United States.

Each building was essentially like its own private business, which meant data would have to be manually gathered and coaxed out of thousands of building owners and brokers.

He started with a single city before moving to a second. It would take the better part of three decades before they had comprehensive national coverage.

Florance didn’t do it alone though. CoStar has the largest real estate research force that today stands at 1,600+ strong. They had a fleet of vehicles to survey buildings and map out cities years before Google Maps. And with scale came new privileges: direct data feeds to buildings owners and a network effect of brokers who themselves inputted data into their platform.

CoStar didn’t stop there though. While acquisitions were a common tool early on to build out their geographic coverage and product breadth, they weren’t against using them to make bold bets on ancillary real estate businesses.

In 2014 they purchased a floundering #5 apartment rental site—Apartments.com—with the goal of making it #1. It took an aggressive marketing campaign, but today they successfully 10x’ed traffic, taking the top apartment marketplace spot.

What has been the result of CoStar’s multi-decade slog to digitize real estate been so far? 96% subscription revenues, 90% renewal rates, and >100% FCF conversion.  

With under $3bn in revenue against a TAM Andy Florance estimates around $100bn, they aren’t letting up. They are running the same aggressive playbook with apartments.com in residential real estate all while expanding internationally and trying to grow new businesses like Ten-X’s commerical auction platform and fend off a growing chorus of real estate data analytics competitors.

Can CoStar continue its dominance of the real estate data and analytics, or will it fall wayside to newer start-ups and well-funded competitors like Moody’s and MSCI? Is their attempt to upend the residential market misplaced and bound to end in one of the largest failed advertising campaigns?

All of this and much more is covered in our 94 page, 20K+ word report!  

Speedwell Members can access the CoStar report here, as well as our growing library of our research report!

(Please reach out to info@speedwellresearch.com if you have any issues or need to speak to us to become an approved vendor in order to expense the membership).

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CoStar Table of Contents

1. Founding History
2. Business History
3. Business
4. Industry
   1. Residential Home Sales
   2. Multifamily Rentals
   3. Commercial
5. Competition
   1. The CoStar Suite & LoopNet
   2. Apartments.com Network
6. Other Assets
7. Other Initiatives
   1. Ten-X
   2. Residential
   3. International
8. ROIC, Capital Allocation, & Culture
9. Valuation
10. Risks
11. Summary Model
    1. Historical Model
    2. Summary Model
12. Conclusion

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